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The Gap Inc. (GPS): Insiders Aren’t Crazy About It But Hedge Funds Love It

Is The Gap Inc. (NYSE:GPS) a buy?

In today’s marketplace, there are many metrics market participants can use to monitor their holdings. A pair of the most under-the-radar are hedge fund and insider trading sentiment. At Insider Monkey, our studies have shown that, historically, those who follow the best picks of the best fund managers can outpace the market by a very impressive margin (see just how much).

Equally as necessary, positive insider trading sentiment is a second way to analyze the marketplace. As the old adage goes: there are a variety of stimuli for a bullish insider to get rid of shares of his or her company, but just one, very simple reason why they would initiate a purchase. Many academic studies have demonstrated the impressive potential of this method if investors understand what to do (learn more here).

Now that that’s out of the way, let’s study the newest info surrounding The Gap Inc. (NYSE:GPS).

How are hedge funds trading The Gap Inc. (NYSE:GPS)?

In preparation for the third quarter, a total of 35 of the hedge funds we track were long in this stock, a change of 35% from the previous quarter. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were upping their holdings substantially.

The Gap Inc. (NYSE:GPS)According to our 13F database, Lone Pine Capital, managed by Stephen Mandel, holds the largest position in The Gap Inc. (NYSE:GPS). Lone Pine Capital has a $799.4 million position in the stock, comprising 3.9% of its 13F portfolio. Coming in second is Edward Lampert of ESL Investments, with a $432.5 million position; 14.5% of its 13F portfolio is allocated to the company. Remaining hedge funds that are bullish include John Griffin’s Blue Ridge Capital, Steven Cohen’s SAC Capital Advisors and Matt McLennan’s First Eagle Investment Management.

With a general bullishness amongst the titans, certain money managers were breaking ground themselves. Lone Pine Capital, managed by Stephen Mandel, created the biggest position in The Gap Inc. (NYSE:GPS). Lone Pine Capital had 799.4 million invested in the company at the end of the quarter. Edward Lampert’s ESL Investments also made a $432.5 million investment in the stock during the quarter. The following funds were also among the new GPS investors: John Griffin’s Blue Ridge Capital, Steven Cohen’s SAC Capital Advisors, and Matt McLennan’s First Eagle Investment Management.

What do corporate executives and insiders think about The Gap Inc. (NYSE:GPS)?

Insider buying is at its handiest when the company in focus has seen transactions within the past half-year. Over the last half-year time frame, The Gap Inc. (NYSE:GPS) has experienced zero unique insiders buying, and 9 insider sales (see the details of insider trades here).

We’ll also take a look at the relationship between both of these indicators in other stocks similar to The Gap Inc. (NYSE:GPS). These stocks are Urban Outfitters, Inc. (NASDAQ:URBN), Nordstrom, Inc. (NYSE:JWN), Michael Kors Holdings Ltd (NYSE:KORS), Limited Brands, Inc. (NYSE:LTD), and Ross Stores, Inc. (NASDAQ:ROST). This group of stocks are in the apparel stores industry and their market caps resemble GPS’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Urban Outfitters, Inc. (NASDAQ:URBN) 34 0 5
Nordstrom, Inc. (NYSE:JWN) 22 0 13
Michael Kors Holdings Ltd (NYSE:KORS) 46 0 1
Limited Brands, Inc. (NYSE:LTD) 21 0 5
Ross Stores, Inc. (NASDAQ:ROST) 37 0 8

Using the results shown by Insider Monkey’s strategies, regular investors must always pay attention to hedge fund and insider trading sentiment, and The Gap Inc. (NYSE:GPS) is no exception.

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